Binance and SEC Clash Over Evidence and Witness Depositions in Ongoing Dispute

Sentiment: Neutral

The intense legal tussle between Binance and the U.S. Securities and Exchange Commission (SEC) has entered a new phase, marked by escalating tensions over evidence production and witness depositions. The latest court document reveals a deepening divide as the SEC insists on obtaining what they deem as "critical discovery items" from Binance's parent company, BAM Trading Services.

The SEC has thrown down the gauntlet, demanding comprehensive evidence from Binance, with a particular focus on the security and control of customer assets. The regulatory body's suspicions of a potential "backdoor" in Binance.US, akin to the one discovered at the now-defunct FTX, have further intensified the scrutiny. The fear is that such a vulnerability could open the door to manipulation of customer funds, echoing the troubles faced by FTX.

BAM's Defense: Pushing Back Against SEC's Alleged Overreach

In response, BAM's legal team vehemently asserts that they have fulfilled all their document production obligations as per the court-ordered agreement. They go on to request the declaration of the completion of the "expedited discovery" phase. Accusations are hurled at the SEC, accusing them of exceeding the agreed-upon scope by delving too deep into BAM's historical and current custody practices.

The legal battleground expands to witness depositions, with the SEC pushing for further questioning of BAM's former CEO and CFO. However, BAM contends that the dozen depositions already conducted are sufficient. Negotiations are ongoing regarding a potential deposition of Binance co-founder Changpeng Zhao, with disagreements swirling around the scope, timing, location, and number of sessions.

Zhao's Fate Hangs in the Balance: Sentencing Looms

The spotlight shifts to Changpeng Zhao, who resigned in November 2023 as part of a monumental $4.3 billion settlement with U.S. regulators. Set for sentencing on February 23, 2024, Zhao faces up to 18 months in prison, remaining free on a $175 million bond. The looming next court status report, expected by February 15, adds an air of anticipation to the unfolding drama.

This high-stakes legal battle carries profound implications for the future of cryptocurrency regulation in the U.S. The outcomes of the ongoing discovery phase and Zhao's imminent sentencing stand poised to set precedents, dictating how the SEC will engage with the dynamic and ever-evolving crypto industry.

Key Points:

  • Ongoing clash between Binance and SEC intensifies over evidence production and witness depositions.

  • SEC raises concerns about a potential "backdoor" in Binance.US, drawing parallels with the FTX case.

  • BAM Trading Services defends against SEC's alleged overreach, declaring completion of discovery obligations.

  • Disputes arise over witness depositions, with negotiations ongoing for Changpeng Zhao's potential testimony.

  • Zhao's sentencing on February 23, 2024, holds significant implications for the crypto industry and sets the stage for future SEC interactions.

About the Author

Ex-crypto miner and crypto enthusiast since 2019.

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